ONGC to extend vessel deals at old contract rates

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Feb 2009

Faced with delays in supply of offshore supply vessels (OSVs) for its oil and gas exploration operations, ONGC has decided to cancel tenders for the vessels and extend vessel contracts on a nomination basis at old contract rates. This is expected to benefit Indian shipping companies such as Shipping Corporation of India, Great Eastern Shipping, Great Offshore and Varun Shipping, which have their OSVs on charter with ONGC.
Sources said the participation by foreign OSV owners in the ONGC tenders was leading to prolonged negotiations over prices and other issues, which was affecting the oil explorer’s operations. Tenders for seven and five vessels were issued by ONGC in February and April last year, but even in the beginning of 2009 negotiations were still going on with mostly the foreign owners over rates and other terms and conditions.
ONGC, according to the sources, was facing a shortage of up to 28 OSVs during its prime production and drilling period some weeks ago, which threatened to affect its production and exploration targets.
ONGC Vessels
Apart from delays in finalisation of the tenders, non-availability of a slice of ONGC’s own vessels also contributed to the shortage. In fact, reports indicate that towards the end of December 2008, out of the 30 OSVs owned by ONGC, hardly eight or nine were operational.
What has further accentuated the shortage is the inadequacies in dry-docking facilities in this region, as also problems in securing spare parts for ONGC’s ageing fleet, industry sources said. With a bulk of the vessels aged over 20 years, these are requiring extensive repair and steel renewal work. And non-availability of adequate dry docking facilities is forcing the vessels to move to foreign dockyards such as Colombo for the repairs, consuming additional time and costs.
Problems
Shortage of qualified ship crew and class surveyors in the market, long lead delivery time by some of the OEMs for certain critical engine spares and the stringent inspection and certification criteria being adopted by surveyors are the other factors leading to delays in supply of the vessels to ONGC.
It is against this background that the oil exploration major took the decision to do away with the tenders and extend the vessel contracts on a nomination basis. “This will be beneficial to both ONGC as well as Indian shipping companies. While ONGC can get assures supply of OSVs, the Indian owners can be ensured of full utilisation of their fleet,” an industry source said.
Last month ONGC announced that it would invest about $5.3 billion to develop gas and oil finds in the KG Basin to produce 25 mmscmd of gas and 8,000 barrels of oil a day by 2012-13.
Sources said in view of the present situation, ONGC, as part of its long-term measure, is speeding up the process of construction of state-of-the-art 12 OSVs, which are expected to be delivered by 2011-12.

Source: The Hindu Business Line